tv [untitled] March 23, 2012 9:30pm-10:00pm EDT
for the next ten years, and then with obamacare in place. and the difference between those two projections reveals how much additional spending any specific state would incur as a result of implementing obamacare. this methodology captures all the different states, policies, their specific demographic conditions and the environment factors that they have. so bottom line i've done the estimates so far for about a dozen states. i'm not showing all of them. some of them are not really ready for prime time as of yet. what i'm showing is the top five states california through texas. those are the five states who are the largest population wise in the u.s. and then a bunch of other states, some more rural, some more urban, some are sparsely populated. a smattering of states of all
kinds from the west coast to the east coast, central, midwestern, and so on. the first column of numbers is the number of pre-obamacare enrollees that i estimate or i project for the year 2014. so these are projections of medicare enrollees using my methodology, shown for just 2014 in this table. and the next column shows the percentage increase that that implies. these are new enrollees from among the newly eligible folks, newly eligible medicaid folks. so of course these folks will be mostly paid for. the cost, the medicaid costs would mostly be paid for by the federal government, as i mentioned. these are are newly eligible. they were made eligible newly by obama care. the next two columns, the red columns show the new enrollees from the old el i believes.
those are eligible today for medicaid but are not unrolled for other reasons. they're uninformed, they don't need health care, they may have private insurance. all of the different contingencies. some people who are eligible today are not enrolled. the individual mandate will induce them, some of them to enroll. i don't assume that all will enroll. this is a methodology that follows calibrating exactly how many will enroll based on the data, again. and percentage increase and enrollment over the pre-obamacare enrollees is the first column. except for california, most states will experience at least a 10% or more greater number of enrollees from among the latter group. this is the source of the increased cost that states will have to foot the bill for. so this is the baseline estimate. those are about -- these numbers are about how many more enrollees we'll have.
this is an example slide using new jersey as an example. to tell you about the funding increase, or the spending increase under obamacare. now in this slide i have a horizontal line in red which is the freeze baseline. it's the expense spending is frozen as 2013, the projected level for 2013. i'm just keeping that constant, just to get a sense of how much additional spending is projected to happen even without obamacare, which is the blue dash line. and how much additional spending on top of that will happen as a result of implementing obamacare. so that dotted black line is the projected spending under obama care. now the segments of line, especially the black dotted lines have several segments of jump. the first jump just after this solid segment of the line is because the american
reinvestment act enhanced federal matching rate disappeared. so states had to spend more on medicaid. beginning in 2014 there's a big ramp up. that's increased enrollment of these folks who were currently eligible but not enrolled. that will ramp up costs. there's a ramp up in 2017 as a result of the reduced federal matching for the newly eligible individuals who will be enrolled into medicaid. that explains this chart as you can see in new jersey the addition that is the difference between the top line and the dashed blue line is quite large. so obamacare is responsible for the difference in additional spending as a result of implementing it beginning in 2014. and it's a big amount in new jersey is a special case because it has as you can see from the
previous chart about 600,000 new enrollees just in 2014, and later up they'll ramp up along with the trend of rising enrollment in medicaid. i've done a bunch of states. i'll show you california, for example. the difference between the blue and the dot line is not great. that happens because in the case of california most of folks who are currently eligible for medicaid are actually enrolled. it's 90 plus per cent. most californians who are eligible for medicaid are in the program. but in the state -- in new york, for example, looks like new jersey, close to new jersey. not surprising. but there's a considerable ramp up as a result of implementing obama care. same story for texas. what you're looking for is how big the difference is between the blue and the black line. florida, texas, illinois, oklahoma, nevada, kansas, and so on. for most states the ramp up due
to obamacare is quite substantial. here's a summary of the ten-year cost. this is cumulative spending increase over ten years for the same states. so the first column is again the fees baseline. so add up the spending if spending per year were flat that's the first column. and the spending without obama care in dollars billions of dollars -- i'm sorry, this must be millions of dollars. that's a mistake. that should be millions of dollars. no, i'm sorry. it is billions. it's cumulative over ten years, which is why it's a big number. so the dark column shows, the bold column shows the increase from the base freeze line. if current law would continue, obama care would not implement it, you'd have a consider ramp up in cost over the freeze baseline. the freeze baseline is artificial just to show how much additional costs we'll pay even if current law were to stay in
place if we follow the projections that we see historically. that's quite considerable already. so states are looking at fairly significant increase in their medicaid spending even without obamacare. but when you add obamacare on top of that, for most states except for california, the increase in spending ranges from 20% for some states all the way up to 50% for new jersey, which is the state that i have analyzed that has the largest increase as a result of obamacare. so obamacare will add significantly to state medicaid spending, and obviously, the money has to come from somewhere, and the question is where is it going to come from. so why would you belief my projections? why? so let's look at massachusetts, which already has an individual mandate in place. and so you can see, these are
medicaid spending numbers per capita. that's the blue line and as a budget share of the massachusetts general fund budget. so this money is basically what massachusetts residents are paying for not -- doesn't include the federal funds. massachusetts had a waiver program in place after romneycare was adopted. i've adjusted for the fact that the federal government is providing match, but it's not reported as a federal match. it's all recorded as part of the general fund. but i'm assuming the match would have been 50 mernt in any case. even with the waiver. so i'm reducing what is reported as massachusetts' expenditure by 50%. despite that you see a ramp up in spending. now one question is there is a ramp up. you can see that. is it because of the recession? for example in the 2001 episode, the recession caused the jump up in enrollment and spending.
so is the latest ramp up a result of the same kind of thing? is it because of the recession or is it because of romneycare? you can get some idea if you look at all the surrounding states vermont, connecticut, new hampshire and maine. which are in the same region. but from vermont, new hampshire and maine, both the lines eventually decline and they show no secular increase or consistent increase over the 2000 decade as is the case with massachusetts. there is an increase in connecticut, but i went down to the weeds and saw there in their budget reports the increase in the red line in 2009-2010 is because of the recession, because revenues and the size of the general fund reduce considerably, which is why the ratio of the medicaid spending to the total budget went up. connecticut increase in the red line is the result of a
recession. i confirmed that. because the general fund is smaller. massachusetts there's no similar decline in the general fund it's all because of spending increases. so this kind of analysis gives us some clue that the massachusetts increase is not purely because of recession. there's a big element of romneycare that's causing that increase. i suspect it's because again there were a bunch of nonenrolled eligibles for medicaid who are induced to enroll in medicaid once the original mandate was implemented. so i suspect that these projections are conservative. there's a reason to believe that. one is that not all eligibles are assumed to enroll after 2014 under the obamacare case. because the formula for deriving the enrollments is based on observed private or employer-based coverage. so those who are covered under
private insurance, even though they're medicare eligible, are not assumed to switch. potentially a switch from private to medicaid that would occur and has been observed to occur many the past with public insurance programs were expanded is not assumed to occur in my projections. but that's likely to actually happen. we have these enrollments facilitation drives that will accompany the implementation of obamacare and so on. so there will be some momentum or some inducement for people to switch from private to medicaid which is not in these projections. and i am including the cost savings that will emerge once more people enroll into medicaid. so the potential criticisms one might say other people have found smaller spending increases. but when i look at those studies one thing is clear that their projections are based on the single historical year 2007 taking their enrollment and eligibility and so on rates from
the congressional budget office studies. but neither the congressional budget office nor these other studies really reveal what -- how their method works, how exactly they make their projections. they're based on so-called simulations which are like boxes. we don't know what's going on in the simulations. i suspect the various elasticities and rates that they use are hypothetical guesses by the folks who are running the simulations, and it's also unclear whether these projections are sufficiently desegregated as is the case for my projections. another criticism might be that using the same cost rate for new enrollees is inappropriate because you might think of people are not enrolling into medicaid because they don't need health care and they would continue to not need as much health care even if they were
forced to enroll or induced to enroll under the individual mandate. as one study has shown when people enroll into a health insurance program, their utilization and the cost per enrollee tends to converge to the utilization and cost of people who have already enrolled in the program. and i might note that historically it's certainly true that we have usually underestimated cost increases when government insurance programs for health and other items has been expanded. so i'll wind up by saying it's a very expensive unfunded mandate that would be imposed on states. these estimates certainly are not very precisely estimated. they come with a lot of uncertainty. my suspicion is the estimates i have just shown you are likely to turn out in the low.
i suggesteded maybe we should actually allow obamacare to go through just to validate my projections. so it's a looming fiscal disaster for states. and it basically sucks off money from other state priorities or put tremendous additional burden on taxpayers. thank you. [ applause ] >> thank you very much, jagadeesh. we've now heard the effects of obamacare's medicaid aspects upon the states. states that are already stretched thin in their budgets in many, many cases. we're now going to turn to legal aspects and to the question whether congress can compel states to expand their medicaid roles and coverage using the taxing power to do so with the threat if the states do not do
so then they will lose all they currently receive from the federal government for medicaid. meanwhile, their taxpayers will have to continue paying federal taxes so that citizens in other states will enjoy medicaid coverage. to argue from the plaintiffs' side the 26 states, we're going we're going to hear first from tim sandefur, and then for defense from simon lazarus. tim is a principle attorney at the pacific legal foundation in sacramento, california. as the lead attorney in the foundation's economic liberty project he works to protect businesses against abusive government regulation. he's the author of two books both published by the cato institute. "cornerstone of liberty, property rights in the 21st century" and "the right to earn a living, economic freedom in the law" as well as some 40
scholarly articles on the subjects ranging from eminent domain and legal issues of slavery and the civil war. i understand he's joust got an article on shakespeare. so he is truly a renaissance man and unbelievably prolific for someone so young. he's a graduate of hillsdale college and he is also a graduate of the chapman university school of law and he's an adjunct professor of law at the mcgeorge school of law in sacramento. please welcome tim sandefur. [ applause ] >> thank you very much. as you know, most of the attention in the obamacare case has been focused on the constitutionality of the individual mandate and whether that is constitutional under the commerce clause. and one of the arguments is if congress can force people to buy insurance under the commerce clause, what can it not do? that would in theory expand federal power to the point where
practically speaking it could do anything it wants. well, a very similar issue is presented when we talk about the medicaid expansion, because that is done under a different clause of the constitution, the taxing and spending power of the constitution. and the question here also is whether congress really has any limits at all. the federal government spends money by giving it to states, and it says to these states if you want this money, you have to comply with our requirements. well, the question then arises what kind of conditions can the federal government put on the receipt of federal funds. in the most famous case on this is the south dakota versus dole case. that case the federal government required the state of south dakota to change its drinking age in exchange for receiving certain federal highway funds. and the state challenged that and said that that was unconstitutional. it interfered with the state's authority as a sovereign to make these decisions for itself. and the u.s. supreme court in a decision by justice rehnquist said that this was still
constitutional, but there might be cases where congress was going too far. well, of course, just as in the takings clause cases, we don't know what "goes too far" means. and since then there has really been no development in the case law on this issue. and keep in mind that in that case in dole we were talking about 5% i believe it was of the federal highway funds, i believe the total amount of money involved in dole was something like $4.5 million. now we are talking about a tremendous amount of money, as we saw. in fact, medicaid funding to states is usually -- federal health care funding in general is usually the largest single block of any state's budget. and the states are told that they must comply with the aca's requirements or they lose all of the funding. not just the incremental increase that might be caused by the new requirements, but all of their funding. as you saw, the bill required --
the new act requires states to expand eligibility, and then it requires people to sign up for health insurance, which they can do by signing up for medicaid. so the states argue that the law basically forces people on to their medicaid roles. and since states will bear an increasing share of the costs for this over time, it basically forces the states to take over the care of these individuals. now the defense, and the defense in dole was well, this is basically just a contract. states take the money, they agree to the strings attached to that money. if they don't like the conditions, they don't have to take the money. well, that may have been an argument in dole, but it's hardly an argument here. after all, as i said, the states lose all of the funding if they reject these conditions, and it's worse even than that. they might lose funding for other federal programs. if they reject these conditions. and the argument that we made in our amicus brief is that states
can't actually opt out of medicaid now under another federal institute, the emergency medical treatment act, it is a federal crime to one hospital to another for an indigent patient for financial reasons. there was an article in a recent magazine a few months ago about this if a state tried to say, you know what, we're opting out. we don't want to be part of this anymore, they would have to set up an alternative state-based system to take care of the indigent and that would require them to transfer the patients which is a federal crime. so states are not actually able to opt out of the medicaid system. the argument that we made in our amicus brief also and hinted at by the states in their briefs is the spending clause really should be limited to the enumerated powers in the constitution. the spending clause should not be treated as an end run around the limitation on federal power in the constitution. right now the federal government has certain powers in the
-- listed in are theable eed in 8 of the constitution and they can't in theory do anything beyond those limits. but they have been using the federal spending power to get around those limits and impose federal policy by inducement. this inducement is as i said a tremendous amount of the state budget. if a state did try to opt out, it would still have to send its tax money to washington, d.c. to be spent on those states that still opted in. it's not like if a state said we don't like these conditions we're not going to take the money. it's not like the taxpayers are relieved of their burd tine support the states that do opt into the system. they're still required to do that. which would mean states would have to raise their taxes tremendously in order to compensate for the loss of funding. the federal government's argument is, you know, the health and human services has always said they retain the authority to withhold medicaid funding if you fail to comply and the medicaid act was always made conditional that we could change the conditions required and if you allow states to say we don't like the conditions
that go along with this funding that's basically allowing the states to dictate the use of federal dollars. those are reasonable arguments. and the problem here is that there really is no case law. where do we draw the line to say these conditions are too burdensome? will the court want to get into that issue. will the supreme court want to get into saying, well, some conditions are too extreme. if they do, you will see a lot of lawsuits brought by states to invalidate conditions on federal funding. the court will be forced to come up with some other tests to apply to those conditions in such argument against that, the states make in their brief is, we have to draw the line somewhere. in tas v butler, the united states said, if in lieu of compulsory regulation congress could invoke the taxes and spending power to accomplish a forbidden end, then the spending power would become subversion of the government powers reserved for the states. that's clearly true.
you can't say it is a fair exchange when the highwayman says "your money or your life." and the same thing is true of the federal government's relationship to the states. federal government can't -- we all know from the coercion cases that the federal government couldn't force the states to do certain things. new york v united states, congress can't compel a state legislature to pass certain laws. well it also shouldn't be allowed to say, you have to give us your money. you have to give us federal income taxes and taxes for us to spend as we will, and we'll give some of that back to comply with our demands. and our demand exceed our constitutionally authorized powers. that is an unreasonable way of interpreting the constitution. how do i think the court's going to rule? you know, it's hard to tell this is as i said basically a blank slate. we have butler from 1936 and we have the dole case. that's about it. no court so far as i know, has ever enforced the spending clause as a shield against federal power. and i think that -- the justices will be skeptical of wading into this area.
but, i think that dole makes it very clear that some things have to go too far. and when we're talking about this system that basically co-ops the states into branches of the federal government with regard to medical care then you are talking about something that goes too far. thank you. >> thank you, tim for your succinct argument. we're now going to hear from the other side. simon lazarus serves as policy counsel at the national senior citizens law center. he served as associate director of jimmy carter's white house domestic policy staff as a partner in powell, goldstein, frazier and murphy, and as a senior counsel at sidley, austin. he has written prolifically. as has tim. he writes frequently for the american constitution society. the acs blog. and has published several acs
issue briefs including mandatory health insurance -- is it constitutional which came out in december 2009. and the health care lawsuits, unraveling a send chcentury of constitutional law and fabric of a modern american government which came out in february 2011. his atlantic article the most dangerous branch was republished in the best american political writing of 2003. he graduated from yale law school where he was a note and comment editor of the yale law journal. please welcome simon lazarus. [ applause ] >> thank you very much. i don't want to disturb your computer. if you want. >> shut it down. >> just shut it down. >> there you go. thanks. well, thanks very much, roger.
thanks to you and your colleagues for hosting this very fine conference. and in particular, i want to thank you for recognizing the importance of this medicaid expansion issue that all of you have spoken to. i have all along seen this as a sleeper issue and one that raises very significant questions. i hardly disagree with i think each of you on most of the ways in which you look at those questions and many of the things that you said about the facts surrounding them. but i share a view that congress' spending clause authority is a very significant part of the way in which our country is governed. and so the courts addressing that issue is very important and it's an issue which -- just
hasn't gotten a lot of respect. there's almost nothing about it in the press. even though here it is sitting on the court's docket. i think it's -- and there are innumerable debates like this one that have been staged in the last two weeks in this town. as far as i know, none have been about the medicaid issue. they have all been rehashing the same interesting, but same arguments that most of us are very familiar with about the individual mandate issue. so what i -- i want to just summarize up front. is a few things. first of all, i think that this issue has the potential to affect not only the fundamental constitutional law governing the exercise of domestic power by
the federal government and the states. it has more potential to affect that than the individual mandate issue does. and it certainly has more potential i think to affect the actual social and governmental practice in terms of the distribution of power between the states and the federal government. i'd also say that the legal attack on the affordable care act medicaid expansion provisions much more than the individual mandate side of their case is an overt, overt not sneaky, but an overt drive to effect a revolutionary change in constitutional law and in
governmental practice. the legal briefs on filed by the republican officials in the 26 states challenging the law are very much closer to the libertarian philosophical and somewhat radical briefs filed by a number of you all. then perhaps is the case with respect to the commerce clause, the relatively more mundane commerce clause arguments being made against the mandate on that side of the case. i'd like to make one other point. just to begin and that is this is not a state versus federal issue. this is a partisan democrat